AIG Decision on U.S. Claims Case Challenged by Greenberg

March 12 (Bloomberg) -- Former American International Group
Inc. Chief Executive Officer Maurice “Hank” Greenberg asked a
judge to reject the company’s decision not to join his lawsuit
against the U.S. over its bailout of the insurer, saying the
board was coerced by government threats.

Greenberg’s Starr International Co., in an amended
complaint filed in the U.S. Court of Federal Claims, also said
the board failed to conduct a full and independent review of the
lawsuit Starr brought on behalf of AIG shareholders before its
Jan. 9 vote. Starr asked U.S. Claims Judge Thomas Wheeler to
find the board wrongfully decided to stay out of the case.

“The United States indicated it would wage a negative
public relations campaign against AIG and its directors,
terminate any cooperative relationship with AIG, and heavily
scrutinize AIG’s SEC, tax and other filings from the 2008 to
2010 period when defendant controlled AIG,” wrote Starr’s
lawyer, David Boies of Boies, Schiller & Flexner LLP.

The U.S. initially took a stake of 80 percent in the
company, and the holding climbed to 92 percent as the aid
package swelled to $182.3 billion. The New York-based insurer
repaid the assistance last year.

Unanimous Vote

AIG’s board unanimously agreed not to join the suit, saying
it was unlikely to succeed and risked harming the insurer’s
reputation after the bailout.

The case “threatened to destroy much of the good work that
AIG and its employees had done rebuilding AIG and its name,”
the board said in a Jan. 23 court filing. “This concern was
consistent with the media coverage and statements made by
elected officials highly critical of AIG for even considering
the demand.”

Starr, a closely held investment company, sued the
government in 2011 for $25 billion, calling the public
assumption of almost 80 percent of AIG stock in September 2008 a
seizure of property in violation of the U.S. Constitution’s
Fifth Amendment right to just compensation.

AIG will move to dismiss the derivative claims asserted by
Starr in AIG’s name, the company said today in an e-mailed
statement.

“The AIG board of directors’ decision has not changed
since it refused in January the Starr demand in its entirety,
and AIG will neither pursue these claims itself nor permit Starr
to pursue them in AIG’s name,” according to the statement.

Charles Miller, a Justice Department spokesman, declined to
comment on the filing.

‘No Merit Whatsoever’

“Two months ago, the AIG Board of Directors carefully
reviewed Starr’s allegations and decided that they were not
worth pursuing,” according to a Treasury Department statement.
“We continue to believe that the claims have no merit
whatsoever, and we will continue to defend the case
vigorously.”

Yesterday, Wheeler granted a request by Starr to certify
two classes of AIG investors in the suit.

Starr, in the amended complaint filed late yesterday in
Washington, says AIG’s board was elected to act in the best
interests of the Treasury Department. The directors who decided
to stay out of Greenberg’s suit were involved in the 2008
takeover, according to the complaint.

“The personal and reputational interest of such
individuals could not allow them to vote in favor of the
lawsuit,” according to the complaint.

Damages Evidence

The board didn’t properly take into account Wheeler’s
ruling allowing the case to proceed and ignored evidence as to
damages, according to the complaint. AIG’s own $23 billion
valuation of equity interest taken in September 2008 was
rejected in favor of an economist who said the value was far
below what Starr claimed, according to the complaint.

As part of a campaign to intimidate AIG board members,
government officials “condemned the AIG Board for even
considering, much less accepting, the demand,” Starr said.

Wheeler has said he anticipates a trial in the fall of
2014.

The case is Starr International Co. v. U.S., 1:11-cv-00779,
U.S. Court of Federal Claims (Washington).